NetApp Inc. (NASDAQ: NTAP) stock rose over 4.9% on August 27th, 2020 (as of 1:03 pm GMT-4; Source: Google finance) post decent first quarter of FY21 performance but an average second quarter outlook. The firm reported billings rise of 6% yoy to $1.15 billion, while net revenue rose 5% yoy to $1.3 billion, driven by storage business, powered by industry-leading file, block and object software, and Public Cloud Services. All-flash revenue rose 34% yoy to $567 million. Public Cloud Services rose 190% yoy and 60% qoq to $178 million in ARR, driven by acquisitions of Spot, CloudJumper and Talon which delivered a total of $44 million of ARR as of the end of the quarter. Public Cloud Services business rose 120% yoy. Software product revenue rose 2% yoy to $311 million boosted by software-rich all-flash FAS. Software maintenance and hardware maintenance revenue rose 14% yoy and 6% qoq to $608 million. Gross margin rose 1bps on a yoy basis to 68% but Product gross margin fell 2bps to 51.4%, hurt by rising NAND costs and COVID-related pricing trends.
Over half of the new-to-NetApp customers came in through cloud business. The firm acquired CloudJumper, a provider of cloud-based virtual desktop services; and Spot, a leader in compute management and cost optimization on the public clouds. The firm is witnessing rising software-based solutions which complement the high-performance Azure NetApp Files while enabling them to access to net new customers and new wallets, the compute wallet desktop as a service wallet in customer.
For the second quarter of 2020, net revenues were in the range of $1.225 billion and $1.375 billion, which at the midpoint implies a 5% fall in revenues year-over-year and includes 1 point of currency tailwind. Total maintenance revenue is expected to fall on a yoy basis. The firm sees consolidated gross margin to range between 66% and 67% with operating margin to be over 16% in Q2.